There are some fundamental differences between banks and credit unions.  Surprisingly, a lot of people do not know many of the differences.  This lack of knowledge is costing you money, whether it’s in the form of more interest, higher interest rates, or higher fees.

Banks are what most consider the “norm” when it comes to having a bank account with a financial institution.  Banks know there is a lack of knowledge about credit unions with the general public, and banks brand themselves in a way that makes us feel like they are “for the people”.  But actually, banks are just like any other large corporation.  The number one goal is to make money, and as much money as possible.  They accomplish this, primarily, in the form of interest rates and the oh-so popular overdraft fees.

According to The Center For Responsible Lending, the majority of people who pay overdraft fees REPEATEDLY are those that are lower-income, single, non-white customers that rent their home as opposed to own.  Now to me, why would the people that generally pay such crazy fees be the same people that can’t really afford to?  I personally feel this is unfair to the hard working folks, that work 60 hours a week, but make just enough to pay their bills.  These people shouldn’t have to pay a $35-$45 overdraft fee when they probably don’t have much money to spare in the first place!  This is a component of the “game” that we’re in, similar to the “credit game”.  It’s funny how those that probably NEED a loan to help their situation are the ones that pay higher interest rates, because of a low credit score.

So if you think about it, banks make hundreds of millions of dollars in overdraft fee income, off the backs of the working class.  I know of one particular bank in North Carolina that (back in 2005) were making a profit of around $30 million every QUARTER!!!  Coincidentally, this bank had, and still has, some of the highest fees around.  Just think about how much of that $30 million came from people like you, just because you overdrafted your account by a few dollars.  A $35 fee is like a bill payment to many people!!!

So with that said, if you are looking for a financial institution to stash your money, typically credit unions are more favorable.  Since credit unions are non-profit organizations, they are owned by its members and do not have to report to any shareholders.  And because of this, credit unions can offer many of the same products at more appealing rates.  Dividend rates on interest-bearing savings or checking accounts tend to be higher at credit unions.  Also, credit union loans tend to have lower interest rates, compared to big banks.

Most people think it’s hard to become a member of a credit union, or there are strict qualifications (like being a state employee).  Credit Unions want more members, so they try to give options for most people to be able to join.  I suggest to check out a credit union in your area and go to their website.  They should have a “member eligibility” page, which gives a rundown on the options available to become a member.  Most may simply require you to join a credit union created club (for a very low, one-time fee) to become a member (credit unions typically will call you a “member” instead of a “customer”).  But there are many credit unions that give the option of joining them if you have a family member that already has membership.  So really, it would be wise to simply shop around and find out what your options are.  There is bound to be a credit union in your area that will approve you for membership.

Credit Unions also aren’t as strict or “cut and dry” when it comes to approving or denying a loan.  Many banks may simply look at your credit score, and if it doesn’t reach a bare minimum for the dollar amount you’re requesting, then you could be denied quickly.  Many credit unions are different, as they take more of a look at your “complete profile” to determine if you could be approved for the loan.  Factors such as recent credit inquiries (the fewer, the better), payment history on previous loans with a similar loan amount, or if you’ve been a member with them for awhile, they will review your member relationship.  Other factors, like job and residence stability are also good indicators to suggest an approval.

So if you haven’t considered a credit union, definitely give it some thought.  Nowadays, I think we all need to keep as much of our money as possible.  I think a credit union would be a step in the right direction.  peace.